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Rescuing AMSA … But at what cost?

Jan 21, 2025

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RESCUING AMSA

… BUT AT WHAT COST?

by Gerhard Papenfus


Dear employer


The current big news is that Government is in discussion with AMSA in a potential attempt to keep its long steel business operational.


NEASA’s position regarding this controversial matter should not be viewed as being unsympathetic towards the plight of the community of Newcastle, which will be massively affected by these events.


Although NEASA adopts a specific stance in this regard, we are well aware that this is a complicated matter, dependent on the interaction of the financial benefit, versus the prejudice suffered as a result of Government’s protection of AMSA against the importation of affordable, good quality steel. NEASA’s approach considers the reality of the survival of the steel downstream.


According to reports, the following ‘solutions’ to save AMSA’s long steel plant, and the viability of its whole operation, have been touted:


  • throw more taxpayers’ money at AMSA’s predicament. That, of course, is over and above the R1billion already granted to them in 2024;

  • increase subsidies to AMSA in terms of lower electricity prices. In this regard, one needs to keep in mind that AMSA’s antiquated steel mill consumes 60% more electricity in comparison to a modern steel mill. The cost of such a subsidy will also be carried by South Africa’s electricity consumers;

  • granting of a subsidy on rail tariffs. The eventual burden of this ‘assistance’ will also be carried by South Africa’s taxpayers; and/or

  • increase import duties to protect AMSA against the importation of more affordable top-quality steel.


At what cost will these ‘bailouts’ come?


  • the steel downstream will still not have access to imported quality steel at competitive prices;

  • while losing jobs at a particular AMSA plant will be averted, the shedding of many more jobs at thousands of other steel manufacturers will not only continue but most probably increase. The Steel Industry has already shrunk by 20% since the introduction of duties in 2015. This very fact poses a substantial threat to AMSA’s long term viability; and

  • the consumer will pay more for steel and steel-related products as reflected by AMSA’s three price increase announcements, in January 2025 alone, on their entire product-range. This is out of sync with world benchmark steel prices, which are in fact reducing.


What the Department of Trade, Industry and Competition (DTIC) needs to consider is whether the saving of this outdated steel mill is in the interest of the overall South African economy, or whether it will prolong and drag out the eventual demise of this high cost, antiquated, monopolistic steel producer. By the time the inevitable demise of AMSA will occur, not much will be left of the South African steel downstream.


Will it not be wise to rather take the pain now and invest in improvements of the ports and railway lines in order to facilitate economic growth via access to competitive, high-quality steel for the steel industry?


This position is not necessarily against the continued survival of AMSA, but against further measures that exclusively benefit AMSA to the detriment of the rest of the value chain.


Gerhard Papenfus is the Chief Executive of the National Employers' Association of South Africa (NEASA).


For more information

NEASA Media Department

media@neasa.co.za  

NEASA ... the only labour law specialist an employer will ever need.

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